Sparrows Point ripple effect leaves few untouched

Debbie Hurd, bartender and vice president of Pop's Tavern, says business is not good after the layoffs at the nearby Sparrows Point steel mill.

Debbie Hurd, bartender and vice president of Pop's Tavern, says business is not good after the layoffs at the nearby Sparrows Point steel mill. (Baltimore Sun photo by Kim Hairston)

Jamie Smith Hopkins, The Baltimore Sun

Debbie Hurd sees it in the parking lots along North Point Boulevard — the answer to what life would be like if the steel mill that fueled the tight-knit communities near Sparrows Point never reopens.

Fewer cars. Fewer customers for businesses. She gestured in her family's empty bar, Pop's Tavern, and said the days of steelworkers lined up for a drink are long gone.

"Everything I see on this boulevard is really, really hurting," Hurd said. "I've told some of my employees, 'Don't get mad at me if I have to let you go.' "

No big employer goes down without setting off ripples in the local economy. But the Sparrows Point mill is so intertwined with parts of eastern Baltimore County that everyone in the area seems to be affected — or knows someone who is.

More than 1,000 companies, large and small, are owed money by mill owner RG Steel. Some have expensive equipment on the site, and they're worried they won't be able to remove before it's too late. Others relied on steel from the mill for their businesses.

Heidtman Steel is closing its steel processing plant near Sparrows Point, noting that its primary supplier — the mill — "has struggled to maintain profitable operations for some time and its future is uncertain."

Industrial Roll Co. Inc. just moved from Baltimore to a building it renovated a few miles north of Sparrows Point, in part so it could be closer to RG Steel.

"We're got to reinvent ourselves," said Michael Streckfus, Industrial Roll's owner and the fourth generation of his family in the company.

Then there are the businesses, like Pop's, that depend on local residents with money to spend.

Hurd's great-grandfather opened the tavern in 1933 — he got the second liquor license in Baltimore County after Prohibition ended, she said. She started tending bar 35 years ago, when Sparrows Point employed more than 20,000 and workers filled her family's business.

"I remember when we had a line out that door to cash checks," said her brother, Butch Gawlik.

But the workforce kept shrinking. It was down to about 2,000 when RG Steel, the latest in a long line of mill owners, filed for bankruptcy in May. So business at Pop's Tavern already was much slower than it once was — and then RG Steel idled the plant.

A redevelopment firm working with a liquidation company is waiting to close on Sparrows Point after winning the August auction for the mill with a bid of $72 million, less than a tenth of its sale price in 2008. Both firms say they would like to find an operator to restart steelmaking. No one knows if they will.

Hurd's expectations are low. Some weekend nights are good at the tavern, with bands drawing in crowds, but she said the business is barely making it. Daytime is always slow now. And customers aren't feeling lucky — lottery sales, she said, have "gone down really bad."

At Toledo, Ohio-based Heidtman Steel's local plant, employment kept falling as Sparrows Point declined. Now the end is near, and about 20 workers remain. Processing work will end Sept. 28. The last shipments are due to go out by the end of October.

"Every link in the supply chain is interdependent and susceptible during an economic downturn," Tim Berra, the company's president, said in a statement.

Around the corner is AMG Resources Corp., a Pittsburgh-based scrap processor and broker with heaps of metal on its Dundalk property.

"Obviously one of our big customers, both buying material from and selling material to, was RG," said Allan Goldstein, AMG's CEO. "We lost the customer right next door. It does hurt."

He thinks AMG will continue to operate there, but with no steel mill nearby, costs will rise. AMG also is among those with equipment on the Sparrows Point complex, another headache. A late addition to the steel mill sales agreement calls for all equipment to be removed within 21 days of the deal's closing — prompting howls of protest from companies that say their property could take months to move.

AMG told the U.S. Bankruptcy Court in Wilmington that its scrap baler, installed in the ground there, and other heavy equipment — including cranes and radiation-detection units — took roughly eight months to set up and will require about six to remove. The equipment is worth more than $3 million, the company estimated.

Negotiations for more time are under way. But Goldstein sees in the 21-day mandate a reason for pessimism about the steel mill's future.

"Without this equipment, you cannot run that mill," he said. "If they're looking for an operator, that operator is going to say, 'That's one more hurdle — putting the equipment back in.' "

One of the uncertainties for his company and others is the future of RG Steel's railroad, a shortline service long known as the Patapsco & Back Rivers Railroad. AMG uses it to get to the main line, served by CSX and Norfolk Southern, so it can move its product to the rest of the nation.

Almost all of RG Steel's workers have been laid off, but a handful of railroad employees are still on the job — for now. Chris Ober, president of the local railroad union, which is part of the United Steelworkers, said he has no idea what the plan is or even whether his working members are still eligible for pension contributions.

The federal Surface Transportation Board says railroads in bankruptcy cannot stop operating without the court's permission and it's not aware of any such request. Purchaser Environmental Liability Transfer and its partner, Hilco Trading, have not spoken of their plans beyond general comments to the court that did not address the railroad.

The lack of information is maddening, Ober said. The railroad, he said, is different from the steel mill: "We're still making money."

Many things about Sparrows Point's situation drive locals crazy. Federal antitrust regulators ordered former owner ArcelorMittal to sell Sparrows Point in 2007, for instance — there's speculation the mill would still be running otherwise. Or the fact that RG Steel's parent company is owned by a billionaire but failed 16 months after incorporation for lack of cash.

Or that RG asked for, and a bankruptcy judge approved, as much as $20 million in bonuses to retain 10 executives. Yet the company stopped health benefits and supplemental unemployment pay for workers in August.

Meanwhile, RG's properties sold for so little that it's unclear whether unsecured creditors will end up with anything.

Streckfus, whose Industrial Roll is among the creditors, figures he'll be lucky to get 10 percent of what he's owed. He said he let RG Steel run a tab in the months leading up to its bankruptcy because he wanted to work with it at a rough time, wanted to help out the people there he's known for years and years.

He'd rather not say how much he's owed, but it's a lot.

"I can't tell you how upsetting it is that they let those guys get $20 million in bonuses while they did basically all the small-business guys over," he said.

In another sign of RG Steel's ripple effect, eight companies — in addition to RG — are seeking or have been approved for federal training and health-insurance assistance for laid-off workers, all of them citing RG Steel's bankruptcy.

"We are anticipating more," said Scott R. Jensen, interim secretary of the state Department of Labor, Licensing and Regulation, which coordinates those efforts.

Baltimore County officials estimate that 1,000 jobs, on top of the steel mill's 2,000, will be lost as hard-hit vendors, contractors and suppliers lay off.

Dundalk-based Members First Credit Union said it is working with members buffeted by the bankruptcy, talking through survival strategies. Formed in 1969 by Bethlehem Steel workers, the credit union's history is so interwoven with the mill that 10 or 15 customers came in after the bankruptcy case was filed and asked whether they should be taking all their money out.

But CEO Tony McCollim said he's confident the credit union can easily survive the hit because it's better capitalized than many banks. And the credit union's board had the foresight years ago to diversify beyond steelworkers. Employees from 50 organizations can join.

All local businesses should have made similar moves to prepare for a future without the mill, he said.

"Anybody with any common sense could see that this was a possibility," McCollim said. "Everybody was hoping, everybody was praying it wasn't, but anybody with any kind of business sense had to look forward … to plan for this contingency."

Costas Inn did. Costas Triantafilos bought the building in 1971 because he knew the location would benefit from the "tremendous traffic" to and from the mill. His family once did brisk business slinging beer and cashing checks for steelworkers and contractors, but after contraction in the 1980s, "we knew that was going to be the beginning of the end," said Peter Triantafilos, his son and general manager.

So they built a dining room in the early 1990s in hopes of attracting people from outside the immediate area, families looking for good crab cakes. It was a risk, they said, but it worked. They've even been on the "Today" show.

Though they're confident they'll survive, the Triantafilos family has something in common with Pop's Tavern beyond a North Point Boulevard address. The mill, even as a shadow of its former self, meant business for them.